Tag Archives: growth

Searching for Product-Market Fit? Four Common Pitfalls and Ways to Avoid Them

By Karen Utgoff

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Death Valley (© Dan VanHassel. All rights reserved)

Finding product-market fit before investing in full-fledged product or venture development can save money, prevent missteps, reduce risk, and execute effectively. An effective search for product-market fit is essential to realize these benefits. This process involves identifying, testing, and adjusting key assumptions to find the right product for the right market. In my experience four common pitfalls can undermine that search and the resulting outcomes.

Overlooking key assumptions

It is all too easy to overlook key assumptions for future success and thus generally better to start with too many than to miss critical ones. If need be, separate the wheat from the chafe by asking “How would it impact our business if X is not true?” It is also important to recognize and test additional key assumptions that arise during the search process.

Designing hypotheses that aren’t testable

Many searches start with vague hypotheses, often because that is the best that can be done based on current information. As more is learned, hypotheses should quickly become more substantial and measurable. For example, “Clean drinking water is needed in disaster areas” becomes “Lack of clean drinking water causes two or more days of illness in more than 25% of the people living in disaster zones.”

Pivoting too much or not enough

It’s easy to overreact or underreact as you gain evidence to support or refute key assumptions. Pivots should happen when one or more key assumptions are invalidated based on an accumulation of evidence and insight. How much evidence is enough can be tough to gauge. Resist the urge to pivot based on a single or very few data points. Conversely, resist the urge to cling to assumptions for which there is little or no confirming information despite your best efforts.

Fooling yourself

It is easy for entrepreneurs and product champions to misread information gathered in the search for product-market fit. Thick-skinned optimists may be too mindful of how hard they have worked hard on their idea and draw strength when friends and colleagues express casual interest. They may dismiss potential customers’ difficult questions with “they just don’t get it.” Worriers and overly sensitive souls may fool themselves in the opposite direction; hearing every constructive question as a rejection. If either of these sounds familiar, consider that you may be turning a blind-eye to the very evidence that could lead you to product-market fit and future success.

Minimizing missteps

Be aware of blind spots and biases that can interfere with your seeing the situation clearly. We all have them; being mindful of these weaknesses will make you stronger.

Use a team approach to the search for product-market fit. Assemble a team with different perspectives to work together on the search. Be sure to include people with different skills and outlooks to reduce the risk of group think. Empower each team member to disagree without being disagreeable. Whether you are defining key assumptions, designing hypotheses or deciding on a pivot, consider assigning devil’s advocate duties to a team member or adviser who will ask tough questions and doubt conventional wisdom.

Don’t depend on your team or yourself to instinctively sense product-market fit. Instead, define it based on meaningful and measurable metrics in advance so that everyone on the team agrees on what success will look like and be able to recognize it if and when it happens. As you learn more through your search efforts, these indicators will change but this will be grounded in an informed business decision made after thorough discussion rather than a seat-of-the-pants change that slips through unnoticed.

 

© Copyright 2017 Karen Utgoff. All rights reserved.

Focus Early on the Value Proposition to Help Manage New Market and New Product Risks

By Karen Utgoff

Savvy small business owners and startup teams take time to develop, test, and validate assumed value proposition(s) before making a significant investment in a new market or new product. This is a cost effective way to learn whether — and how — to best pursue opportunities. Be smart. Include this step early in your new product development and/or market launch planning efforts.

Is this really necessary? The further a new market or new product is from your current business, the more value-proposition-based, hypothesis-driven approaches are likely to increase your probability of success, help avoid missteps, and minimize the cost of failure. It’s better to recognize a gap between what you think and what your market needs while you have the flexibility to improve product-market fit; if there is an incurable mismatch, it’s better to “fail fast and cheap,” especially if there would have been a big investment. Concerned that this just adds to your costs? Consider the wasted resources and employee demotivation associated with failure of a new product, especially when better alignment between product and customer needs might have led to success.

Before sinking dollars and employee time into a new market or product/service offering, develop a hypothetical value proposition. Use this as your starting assumption as you test, revise, and pivot to achieve the best possible fit between product/services, new target customers/markets and your business goals. Many believe this type of effort is just for startups but it’s very useful for any company ambitious to grow beyond familiar territory. This is different from the process Laurie Breitner describes to take advantage of the existing customer relationships and knowledge a team accumulates over time to clarify and confirm value propositions for established products in well understood markets.

Test your hypothetical value proposition to corroborate, refute, revise, and reinvent before making a big commitment. While methods for doing this aren’t foolproof, you will be amazed at what you can learn. The fundamental idea is to get feedback from customers and influencers early in the process. While this may reveal painful truths, it’s much better than discovering them after building the wrong inventory, focusing on disinterested customers, or setting prices too high or too low.

Three low-cost methods are within reach of most small businesses and new ventures. Each has its strengths. They are not mutually exclusive and are most effective when customized to apply to the particulars of each situation. In all cases, focus on learning not selling.

  • Observe potential users going about their daily routines. See how potential customers currently solve a problem and why they might value your alternative solution. These opportunities take some finesse to structure but cost little and — with the right frame of mind — can deepen your understanding of customers, improve your product, and clarify the value proposition. If you are contemplating entering a new market with an existing (or new) product, this method may work best as a next step with your interviewees (see below). If you are developing a new product for existing customers, it can build on established relationships.
  • Interview potential customers, influencers, distributors, and partners to gauge their attitudes and get their input. Your hypothetical value proposition embodies assumptions about what problems are important to potential customers and what they value in a new solution. One-on-one interviewing lets you test those assumptions and make changes to the value proposition, change the product design, and/or redefine the target market. Plan on devoting significant effort to interviews and to processing what you hear from each interviewee. These videos provide a good general guidance on planning, conducting and learning from interviews as a starting point; different situations, products, industries and customer segments require variations on this approach.
  • Test a pre-commercial (prototype) product by putting it in the hands of potential customers. Recruit a small group of thought leaders, early adopters, and (if you have them) interested customers to individually give you feedback on a prototype. There is nothing like getting an early version into customers’ hands to learn if the form factor, instructions, and performance meet their needs and it’s much better to improve the product before investing in inventory, advertising, and other expensive aspects of a product launch. Interviewing and observing this group maximizes learning — there is no survey that can follow up on interesting remarks or probe for more detail the way a skilled, well-prepared, objective, and curious interviewer can.

Who says you never get a second chance to make a first impression? All three of the above methods enable you to test your ideas, assumptions and decisions. To make the most of them and to preserve your chance for future “first” impressions, follow two rules:

  • Don’t argue with or disparage the expertise of interviewees or others with whom you engage. Be sure not to insist your assumptions are correct or preach that your product is “better.” Instead, acknowledge that you don’t have all the answers and appreciate the opportunity to learn from them. If you need to drill down for more detail, resist the urge to dissect the details in favor of asking open ended questions such as: “Why?” “How?” or “Can you tell me more?”
  • Be considerate. If interviewees are interested in spending more time with you than planned, be encouraged; but do not stay past your allotted time unless invited to do so. Be sure to thank everyone for their time and help. Ask if you may come back to clarify, ask more questions, or share future progress. An enthusiastic “yes” is a good indicator that you are on the right track.

When to begin? It is essential to begin early in the product or market definition/development process while you still have the flexibility, time, and resources to pivot. When well done, using hypothesis-based methods to craft, test, and refine an initially assumed value proposition can help to assure that product development and market development efforts are well-aligned and attuned to customers in initiatives that move forward. This increases the likelihood of success while reducing the risk that further investment will be off target.

 

 

© Copyright 2017 Karen Utgoff. All rights reserved.

When Better Isn’t Good Enough: An Entrepreneur’s Tale

By Karen Utgoff

2017-06-04 Mousetrap_patent_model_3_-_National_Museum_of_American_History_-_DSC00350

By Daderot (Own work) [CC0], via Wikimedia Commons. Exhibit in the National Museum of American History, Washington, DC, USA. Photography was permitted in the museum without restriction.

Many believe that if they build a better mousetrap customers will beat a path to their door, but it isn’t necessarily so. Inventors, small business owners, or startup teams confident that their vision of a better product, service, or technology will automatically lead to business success should balance that confidence with healthy skepticism. Testing product-market fit with potential customers, users, partners, influencers, and others could make the difference between success and failure. Consider this (made-up) cautionary tale.

Howie Ketchum, inventor and CEO of Ketchum Mousetraps, was in a somber mood after reviewing disappointing revenue numbers and similarly troubling web and mobile traffic statistics. Unique first-time visitors were plentiful and many made their way through all of the technical information detailing the advantages of his Internet-of-Things (IOT) enabled mousetrap with smartphone apps to enable monitoring from anywhere in the world. However, pitifully few signed up for more information, or even returned for a second visit let alone ordered the product.

The patented Ketchum IOT Mousetrap added an accelerometer and Wi-Fi connectivity to a traditional mousetrap. When a mouse triggered the trap the accelerometer determined its “status” and notified the owner via the IOT Mousetrap app. The company’s primary target market were home owners, who could buy traps directly from Ketchum. Companies with sensitive facilities could buy traps in bulk and monitor them with the app to provide a system that would be easily monitored by the maintenance staff. In this way, Ketchum planned to disrupt the pest control industry. Apps were available for all smartphones. In addition to notifications, apps kept statistics on all traps in use, allowed users to order new traps, and provided value-added tips on mouse control. If you find Howie Ketchum and his Internet-enabled, Wi-Fi connected mousetrap preposterous, check out this article or this one or this service.

Ketchum’s national product launch had been received with great fanfare including write-ups in top tech magazines and a national tour but did not result in sales. Efforts to improve the marketing and sales process had resulted in more visitors navigating through to the order page but nothing seemed to prompt more lookers to become buyers.

Six months later, Ketchum Mousetraps was out of money and closed for good; the 99,950 of the original 100,000 units of inventory Howie had stocked in anticipation of the product launch sold for 2% of the manufacturing cost. In his final act as CEO, Howie took down the “Build a better mousetrap and the world will beat a path to our door” banner from the reception area and left the office for the last time.

This fictional story illustrates what can happen when “better” isn’t good enough in the real world. Here are some of the (nonfiction) reasons “better” falls short:

Not “better” in the eyes of the customer:  A product or service is only better when it’s better in the eyes of enough customers to support a financially healthy business. Could Ketchum have been successful by offering a somewhat different product packages to the target customers? Or by targeting industrial customers directly? Or by concentrating exclusively on sales through established providers of pest control services? Or by aiming to be a rodent control business rather than mouse control solution?

Contrary to current practices, perceptions, or culture: When “better” involves a change in habits or violates the current culture, it raises rational and emotional objections that may have little to do with the problem the “better” solution solves. For the example of an IOT mousetrap, concerns might include users preferring not to have a phone app declaring they had a mouse problem.

Not invented here: When a customer has a homegrown solution that is already in place, there can be considerable resistance to adopting a new one, especially from a stranger. Whether this resistance is the result of ego or a more objective reason, it’s often impossible to overcome. If Ketchum had talked to  pest control companies, he might have found they already offered low-tech versions mouse control services that allowed for routine operations with well planned, efficient servicing schedules and routes rather than creating a need for immediate, unpredictable service calls as the app might have.

Not a high priority: When the problem is relatively unimportant compared to other issues and/or current situations are pretty good, users often will not take the time to seriously consider “better” offerings. In Ketchum’s situation, most potential customers may see their problem as the occasional mouse rather than a serious infestation.

Switching cost: Any additional burden — even a short term one — imposed by a new solution can easily derail consideration of a “better” product, especially for a low priority situation or where “better” does not result in a measurable financial improvement. For the cautionary case, Ketchum’s app adds a number of costs to the low-tech mousetraps, including giving up personal information, time spent on initial configuration, and the cost of buying new traps.

Switching risk: An unproven solution always carries with it the risk of disappointment. Perhaps it will not work or lead to unintended consequences that cause harm. Will an IOT mousetrap be plagued with false positives or false negatives? Will the app distract users from more important matters? What happens to pest control companies using their system if Ketchum goes out of business?

Too far ahead of its time: One of the most frustrating reasons for “better” falling short is when the improvement is too far ahead of its time. It may be that the time will be right for an IOT-enabled mousetrap when home automation systems controlled by smartphone apps become common.

Refusing to be seduced by the myth of the better mousetrap does not guarantee success but can help both established small businesses and new ventures minimize the cost of failure and live to try another way. My next post will offer thoughts on testing and validating assumed value propositions as a way to do this.

Related links:

Listen to the NPR interview with Professor Bill Hammack of the University of Illinois on “When technology bets fail” and watch his  videos on “How the Sony the Betamax lost to JVC’s VHS recorder” and on “Why the DVORAK keyboard didn’t take over the world.”

Read Nicholas Jackson’s March 28, 2011 article in The Atlantic on “Mousetraps: A Symbol of the American Entrepreneurial Experience

 

© Copyright 2017 Karen Utgoff. All rights reserved.

Want to Have Your Cake and Equity Too? Consider Non-dilutive Funding

By Karen Utgoff

2016-08-24 Non-dilutive fundingRather than taking a piece of your pie, non-dilutive funding sources offer outside funding and/or in-kind resources that let you have your cake and equity too. While it will never take the place of equity investment, secured debt, or bootstrapping, the right non-dilutive resource can be a great precursor, gap filler, supplement, or complement at critical stages. It’s easy to overlook this category of funding but it’s worth considering whether and how it can add value your new or established business.

The right non-dilutive funding at the right time can help finish a product, validate a market, prepare employees for new challenges, or otherwise advance your efforts.

Non-dilutive resources include:

  • Highly competitive grants programs for technology-driven ventures;
  • Small grants open to any business located in a specific state, city or business district;
  • Crowdfunding to build an initial customer-base complete with pre-orders;
  • Training or internship grants to strengthen the workforce;
  • Innovative foundations with grant programs open to for-profit companies with (or occasionally without) non-profit partners;
  • Accelerators, incubators, and competitions; and
  • In-kind resources that provide expertise, tools or connections that would have otherwise required funding.

Non-dilutive resources aren’t free and come with non-financial burdens similar to equity and debt financing.

  • Resources that don’t meet your needs can take your business seriously off course.
  • Non-financial obligations such as administrative, performance, recognition, audit or reporting requirements may apply.
  • Non-dilutive funding takes time and effort to find and use effectively.

Non-dilutive sources offer benefits beyond immediate support.

  • Success with competitive grants or crowdfunding can help you build the technical and business credibility necessary to secure the right investors.
  • Crowdfunding can prime the pump for future interest in your products.
  • Participation may position you for other opportunities in the future.

This post was inspired by my recent MassChallenge talk on the subject. A big thank you to the MC team for inviting me! See the slides from this talk for web links and additional ideas.

© Copyright Karen Utgoff. All rights reserved.

Six Misunderstandings about the Lean Startup

By Karen Utgoff

Use of Lean Startup techniques is becoming ubiquitous in entrepreneurship circles these days and rightly so. Along with the closely related Lean Launchpad methodology, this highly effective approach puts one essential success factor — fit between customers, markets, products and company — front and center for founders who might previously have defaulted to “If we build it they will come.”

In late 2012 I was privileged to serve as a mentor for a National Science Foundation Innovation Corps team and to be immersed in the Lean Launchpad method first-hand as part of that program. For more information on the team experience and methodology, visit Steve Blank’s blog; the link is in the list of resources at the bottom of this post. Recently, in preparation for a workshop I’m giving, I reread Eric Ries’ The Lean Startup and noted his observation that:

“Throughout our celebration of the success of the Lean Startup movement, a note of caution is essential. We cannot afford to have our success breed a new pseudoscience around pivots, MVPs, and the like.” (Eric Ries. The Lean Startup, p. 279)

This rang true to me and prompted me to write here about several significant misunderstandings that I’ve observed.

Misunderstanding One: Lean Launchpad methodology avoids failure. Actually the Lean Launchpad method and the Lean Startup movement focus on failing faster, at lower cost, and under controlled conditions that enable the team to learn rapidly and pivot effectively.

Misunderstanding Two: The tools and techniques are only for brand new startup ventures. Confusion on this point seems to be around the definition of a startup. I’ve written before about the need for entrepreneurial activity in established businesses and I was glad to rediscover Ries addressing the issue:

“Entrepreneurs who operate inside an established organization sometimes are called “intrapreneurs” because of the special circumstances that attend building a startup within a larger company. As I have applied Lean Startup ideas in an ever-widening variety of companies and industries, I have come to believe that intrapreneurs have much more in common with the rest of the community of entrepreneurs than most people believe.” (Eric Ries. The Lean Startup, pp. 26-27)

That said it’s important to recognize that a new external venture is different from an internal venture within a successfully operating business. Here is an interesting post by Henry Chesborough and my take on the subject as well.

Misunderstanding Three: We’re already customer focused and therefore in sync with the philosophy even if we don’t talk about minimal viable products (MVPs) and pivots. Perhaps, but it isn’t necessarily so; the key is the organization’s capacity to systematically learn. Are activities designed so that customer and market response will lead to insights? Is the team aware of leap-of-faith assumptions? Are your entrepreneurial teams truly cross-functional? Is your culture tolerant of setbacks and supportive of learning?

Misunderstanding Four: It’s about product development. This sells the methodology short. Sure, product development is one aspect but equally important is identifying receptive customer segments (customer discovery/development) and business model development. All three may be subject to change as the team learns.

Misunderstanding Five: It’s about iteration. Iteration is necessary but not sufficient. If you don’t organize and measure in a way that allows you to learn, iteration is just spinning your wheels.

Misunderstanding Six: The Lean Startup approach frees us from needing to worry about mission, vision, competition, intellectual property and so forth. Not so! Your initial hypothesis and pivots will be informed by and inform the evolution of each of these.

I hope this blog serves to clarify the Lean Startup and that it encourages you to try, and then embrace, it. It has a lot to offer ambitious entrepreneurs and intrapreneurs.

Books

  • Steve Blank and Bob Dorf, The Startup Owner’s Manual
  • Alexander Osterwalder et al, Business Model Generation (72 page preview available)
  • Eric Ries, The Lean Startup

Web Resources

© Copyright Karen Utgoff. All rights reserved.

Find Funding That Fits Your Needs

By Karen Utgoff

2014-09-01 Bags on MoneyDoes external funding appear to be an attractive approach for fueling the growth of your business? Before you leap to a particular funding option, consider four possible types — debt, equity, grants, and crowdfunding. I have written about the first three here and the last here. Each of these can come from a number of sources — for example banks, venture capitalists, or family — and, of course, you may want to mix and match.

In addition to considering which types and sources of funding are accessible given your situation, it’s important to take into account the risks associated with each. Below are some general thoughts; be sure to evaluate terms and conditions associated with each specific deal that you may be offered.

What financial risks are you willing to accept? Debt and equity — borrowing or sharing ownership — have different uses, benefits, and risks.

Banks and other commercial lenders may expect you to commit personal assets (homes, possessions and savings) in addition to company assets as collateral. If your business fails, the obligation to repay lives on. Even when businesses do well, they are often subject to unpredictable cash flows that may interfere with the ability to service debt. Using debt to purchase equipment, finance inventory, or bridge the gap between making a sale and collecting the revenue can work well unless there is concern about slow inventory turnover and/or customers stretching the time they take to pay — both common occurrences in a weakened economy or in the face of intensifying competition.

Angel and venture capital investors put their money at risk for the opportunity to financially benefit from ownership of part of your business, which they hope will significantly increase in value. Their initial investment may be in the form of convertible debt. To protect their position, investors may expect to participate in key decisions and serve on your board of directors. It’s important to understand the obligations that will result if the business fails; ideally investors will agree to take cash and remaining assets but not expect to get their original investment back. Be sure you understand when investors will want to realize a return on their investment. They may expect you to sell the company or to raise the cash to buy them out.

The risks associated with grants and crowdfunding are usually less daunting but can require some specific result such as delivery of a product, recognition of the funder, execution of a proposed project, and/or a report. Grant givers may also have specific accounting requirements or other standard terms you will need to satisfy.

What personal risks are you willing to take on? Even (or especially) when your friends and families are enthusiastic to help your business and spare you financial risks that come with borrowing from a bank or alternative lender, don’t underestimate possible damage to friendships, marriages, and parent-child relationships that could result. Whether you take a loan or offer them equity, they may have naïve and overconfident assumptions about future success.

Consider how you and they would get along if the business falls short of their expectations. Even if you were not obligated to repay in the event of a business failure, how would you feel if your parents or siblings lost their retirement funds?

Even when the business thrives, dealing with family/friend investors/lenders can become awkward. Some may want to help even when they lack the expertise to do so. Others may feel entitled to participate in operating decisions, suggest potential employees or drop in to “see how things are going.” What’s the plan to provide a return on their investment? To avoid awkwardness, or complicating future rounds of funding, clarify expectations and boundaries in advance. A sophisticated investor will welcome this too and may even take the lead on designing an arrangement that makes sense from both business and personal perspectives.

Can you mitigate the risks of and/or reduce your need for funding? While risks associated with external financing are significant, rewards can be substantial. Be sure you are ready to put the funds to work effectively and to make the most of every dollar. Will your team be prepared to make the most of the new opportunities to which the funding will be directed? Could you improve your cash flow to minimize the risk of problematic surprises? Is it possible to reduce the cash tied up in inventory? Is there a contingency plan to manage setbacks and unexpected obstacles?

Do you have evidence, or merely hope, that you will succeed? Whether the funding you seek is to purchase equipment that will increase the efficiency and profitability, to support the launch of a new product/service/location, or to provide stability over a tough period, you should do your homework. Since all forms of funding come with real costs, it’s important that you have evidence that the expected results will be worth the added burden. Will the changes you anticipate make your business stronger? Will they increase its value?

The right financing at the right time can fuel success. The above points are not intended to discourage you from seeking external funding. If they have, ask yourself why? Resolving those concerns can make for a stronger future business.

 

Related articles:

 

 

© Copyright Karen Utgoff. All rights reserved.

Look Before You Leap

By Laurie Breitner

Public domain. U.S. Air Force photo by Tech. Sgt. Jeremy T. Lock

U.S. Air Force photo by Tech. Sgt. Jeremy T. Lock. Public domain.

Too many entrepreneurs believe raising funds to finance their idea is a first step when starting a new business or expanding an existing one. Some create business plans — often only to satisfy lending guidelines — and head off to shop their ideas at banks or other funding sources. I have known people who depleted their retirement savings, put their homes at risk, and/or tapped friends and relatives with promises of great returns only to discover that they had not done their homework.

While starting or growing a business always involves some risk, none of us wants to take on more than is necessary. Before taking a financial leap, be certain that you can answer these questions thoroughly and with confidence — that is, you have some empirical evidence and/or analysis to back up your passion:

Does your plan have legs? Have you tested your idea to determine that you know and can reach your target market and that your planned offering meets their needs? Please don’t assume that if you “build a better mousetrap” that people will flock to your door to buy one. Instead, talk to potential customers; gauge their interest and learn more about their needs and some obstacles you will likely have to overcome. Also, consider the competition — there is always competition — for your target market’s dollars. How would your business woo customers?

What resources do you have/will you need to be successful? It is essential to have as full an understanding as possible of what resources (expertise, suppliers, location, marketing collateral, forms/contracts, etc.) you have and will need to be successful. If you plan a foray into a new business or market, find someone to help you better detail what’s needed. Consider visiting a library to access industry surveys and statistics (UMass Business Library), getting how-to information from industry associations, talking to business owners in a similar business that serve different geographical markets, and checking out industry discussions on LinkedIn and other web sources.

How long will it be before your plan starts generating revenue? Is your product/service well understood, or will you need to mount an educational effort to explain its uses and benefits? Consider your sales cycle (the elapsed time from initial contact to receiving payment). Do customers make buying decisions immediately, or is there a delay to get approvals, consider alternatives, etc. Typically, how quickly does your target market pay? If you plan to open a retail store, you could realistically expect payment at purchase. If, however, you plan to sell to government agencies, expect significant delays.

Can you start smaller? Many entrepreneurs are so bullish on their products/services and excited by their potential that they seek to fulfill the needs of multiple markets with a range of offerings. What is your low-hanging fruit? Is there a niche market that you could enter to build a satisfied/loyal customer base? Consider starting small to learn what works — and doesn’t — before making a larger investment.

How much will it really take to get your plan off the ground? It’s generally safer to be conservative; no one goes out of business by having too much cash. Before you head off to borrow money, consider whether you could fund your initial foray with cash from on-going operations? For a new venture, is it possible to keep your current job (and income) while building your new business on the side? Many couples/partners who want to open a joint business do so by having one work in the new business and the other stay in their current job to keep the financial boat afloat until the new venture starts to make enough money to support both. Typically it takes about 3 years for a new business to be able to support its owner.

How will you measure success? Some entrepreneurs wait until they start generating P&Ls (profit and loss statements) before looking at results. Instead, put together a project plan (with measurable milestones) as early as possible. This is difficult to do, especially without a history of operating results, but the process will help you think through the business challenges ahead. The information you need for your guesstimates will help you with early steps for the business itself — e.g., identify/vet suppliers, develop a sales plan and marketing materials, etc. — and become one yardstick to measure your progress. Adjust revenue projections and planned expenses as you learn. By having a documented plan to help you monitor progress, you will be more nimble and able to uncover small speed bumps before they become major obstacles.

If you learn that you will need outside funding, most banks and other funding sources will appreciate your diligence. And, you will have more confidence during the inevitable tough times when you are doing all the essential pre-work before your earn that satisfying first dollar from your new venture.

© Copyright Laurie Breitner. All rights reserved.

Five Steps to Inspire Business Change and Growth

By Laurie Breitner

Perhaps you’ve had this thought: If only we could work more effectively as a team, respond well to last minute orders or implement a new computer system. Most employers know what they’d like to change about their businesses, but many aren’t sure what steps to take to make it happen. Whether you want to shape a more effective organization or significantly expand your business, here are tips on what you can do to refocus your organization and change its cultural habits.

Establish a climate for change. People often resist change; change is facilitated when the status quo becomes uncomfortable. What can you do to encourage transformation? This may seem odd, but you need to let your organization — including yourself — feel pain. Openly discuss dissatisfaction with those things you’d like to be different.

Inspire your organization to take action. Create a compelling vision of how things could be better. Meet with everyone whose help you’ll need to be successful — your employees, suppliers, vendors, advisers and even selected customers — to talk about your plans. Encourage frank discussion of their perception of your organization’s relative strengths and weaknesses. You may learn about hidden problems and avoid potential pitfalls that could derail your plans. Don’t overlook your banker, business and legal advisers and accountant; getting them onboard early may smooth the way when inevitable stumbling blocks arise and you need their help.

Build a strong alliance of people committed to your goals.The role of this alliance of internal and external resources is to help reinforce your vision of the future, eliminate obstacles, generate short-term successes and change habits in your company culture. Find individuals whose opinions are respected, who agree on your vision and are committed to the process for “the duration.” With their assistance, develop realistic, measurable plans. Encourage quick successes; early achievements help to get doubters behind your program. After all, everyone likes to play on a winning team. Identify important milestones and the dates by which you expect to achieve them. Evaluate progress at regular intervals and make mid-course corrections.

Align your organization for success. Ironically, complex changes can be easier to accomplish than small, incremental shifts. In making systemic change, organizations are forced to confront the larger issues of culture and management style that exist in every organization — systems that make incremental change difficult to accomplish. Here are examples of things to consider:

  • Compensation policies
  • Leadership styles
  • Job descriptions
  • Technology and infrastructure
  • Policies and procedures

Look at all the different ways that current cultural habits are reinforced and revamp those systems that encourage people to resist change.

People don’t oppose their own ideas. People who are involved in deciding what and how things will change are more likely to support the effort; in fact, they themselves can be won over simply through their participation! People who don’t get a voice in what happens tend to resist change. To avoid this problem, involve as many people as possible in building consensus about the need for change and in deciding how to make it. This is an important step in building employee engagement.

Communicate. You cannot do too much to get your message across. Here are hints for successful communication:

  • Keep it simple; make sure that messages are clear and easy to understand.
  • Use metaphors, analogies and stories.
  • Send your message in different ways, e.g., e-mail, newsletters, memo, paycheck stuffers, etc.

Be sincere in your commitment. Walk your talk. Lead by example. Act as you want others to act. Make sure that everyone in your organization is “in the loop.” People who aren’t included may actively resist. Laying out your vision for how the business could improve gives everyone a framework to make good long-term decisions and set priorities…and maximizes your chance for success.

© Copyright 2014 Laurie Breitner. All rights reserved.

Row, Row, Row Your Boat: Are You Missing Warning Signs of Rough Water Ahead?

By Laurie Breitner

Winslow Homer [Public domain], via Wikimedia Commons

Rowing Home, Winslow Homer [Public domain], via Wikimedia Commons

Do you know what your employees are doing? While you may think you do — perhaps not. Whether yours is a relatively new entity, or one that’s been cruising smoothly for some time, it’s easy for issues to develop and go unexamined in the daily crush of getting the job done. This slow drift off course can interrupt the smooth flow that results when all your employees pull together.

These real world stories illustrate what can happen.

  • The owner of company that sells through external, commission-based sales staff was very surprised to learn that the 3:00 PM cutoff for same-day orders was being routinely ignored. Fulfillment staff — operating on the assumption that the owner knew and approved — struggled to satisfy orders that arrived later and later. Sales staff had quickly learned that fulfillment workers were staying late to process orders and took full advantage of an ever broadening window to call in their sales. Employee morale had begun to plummet and “sick” days to increase.
  • A tech company owner could see his staff was buried but didn’t have time to examine why. Overtime hours (and resultant costs) grew and employees seemed frazzled. The owner was wearing so many different hats  — executive, senior technician, salesman, and accountant — he didn’t have time to look into what was happening. Profits margins were eroding and he worried that his skilled workers could burn out or leave.

Many business owners recognize when things aren’t right. But because root causes can be hard to find and talking to employees without a solution can be uncomfortable, some find it tempting to simply hope the situation will improve without taking action. Left unattended what starts as a small problem can rapidly become a crisis; in my experience, it’s best to act swiftly. The longer a problem persists, the harder it is to fix.

The first step is to identify issues as early as possible. What might alert you to potential problems?

  • Declining morale is often the earliest and most obvious sign that everyone is not in sync. Symptoms include increased squabbling, turnover, absenteeism and tardiness, complaints about co-workers, cynicism and/or employees acting as if they are “checked out.” One business owner asked me, why couldn’t it be the way it used to be, everyone pulling together? Do you ever wonder that?
  • An unexpected increase in cost of goods sold (CoGS) and/or decrease in overall profitability are signs that inefficiencies may be creeping in. As a business grows and becomes more complex, spending time to design new workflows or clarify roles and responsibilities often takes a back seat to just getting through each day’s work. Whether your organization has grown, taken on new customers, changed computer systems or begun offering new services, involve affected employees in determining necessary adjustments. Otherwise, you may find gaps and/or overlaps, that is, more than one person feels responsible for a new task or no one does it; either can lead to trouble.
  • Unanticipated defections (or reductions in volume of purchases) of existing customers or an overall drop off in sales may result from dissatisfaction with your company. Front line employees are your organization’s ambassadors. If they are discontent, your customers will sense it and may shy away. Similarly, if a new computer system or vendor causes disruptions in the smooth flow of work, the quality of your products or services may suffer sending customers to the competition And, sadly, long-time customers may be uncomfortable raising their concerns with you, the owner, and just disappear.

While these are common signs, each organization is unique; no list of triggers can be exhaustive.

Here’s where your business plan comes in handy. If you have projected what will occur in terms of sales, staffing, and profitability — and documented your assumptions, of course — you can look periodically (at least monthly) for any deviations from what you thought would happen. Work with employees to get to the bottom of unexpected results — whether they are better or worse. Most employees sincerely want to do a good job and will appreciate being involved.

Are you looking for other ideas to help create and maintain a harmonious and efficient organization?

In my next few posts I’ll explore how to get and keep your organization on track, including ways to address inefficiencies and issues related to employee discontent.

© Copyright 2013 Laurie Breitner. All rights reserved.

Navigating the Innovation Trail: Canyons, Chasms and Sinkholes! Oh My!

By Karen Utgoff

Death Valley (© Dan VanHassel. All rights reserved)

Death Valley (© Dan VanHassel. All rights reserved)

For both innovation-driven new ventures and intrapreneurs in well-established businesses, the road to new business success is frequently rocky and interrupted by gaps large and small. Often the team needs to build the road as it creates the product.  In addition to the significant canyons and chasms along the way, there are many smaller sinkholes that can swallow you and deceptively promising blind alleys that can take you off course. If you decide to blaze an innovation trail, here are some of the challenges you can expect to encounter.

Death Valley (© Dan VanHassel. All rights reserved)

Death Valley (© Dan VanHassel. All rights reserved)

The long, dry valley of death (pdf) between idea and fundable business is treacherous. Your team (and your idea) can die of thirst! Can you convince an angel, venture capitalist, funding agency, your company, or bank to invest, allocate, grant or lend your team what it needs? Can you make your current cash last long enough to see you through or are you counting on “rain” before your checking account runs dry? Be sure to consider carefully what you will need to make it across.

The labyrinth to the first customer is filled with blind alleys that can easily disorient even savvy navigators. Some will never find their way back to the main road. The biggest danger is potential customers who never say “no” but never decide to buy. The sale feels so close. You keep thinking one more meeting will do the trick, making all the time and effort you have invested suddenly worthwhile. It’s so hard to tell the difference between sincere interest from a future customer and someone who simply doesn’t want to offend by saying “no.”

The chasm between first customers and the main market was made famous by Geoffrey Moore in his landmark book Crossing the Chasm: Marketing and Selling High-Tech Products to Mainstream Customers, which analyzed the challenges of growing beyond the first few, true-believing customers to achieve mass market adoption. It can be uncomfortable to move beyond your base of support but to achieve significant growth it must be done.

Cash flow sinkholes often develop on short notice. Even well-funded companies fall into them. There are many causes — for example, a new employee who isn’t productive or an unexpectedly problematic feature of the product — that can undermine your cash flow. It’s easy to spin your wheels in a futile effort to move forward but that only digs a deeper hole. The sooner you realize the underlying problem and fix it, the better.

The high growth grand prix comes just as you think you are home free. Suddenly your Gap Files 2business is growing faster than you thought possible and continuing to accelerate. You can’t take your eyes off the road for a second. Threats and opportunities are coming from all directions and with greater speed. You need to develop habits, processes, systems, and instincts to keep you alive and growing. The good news is that, for those who are brave and persistent enough to navigate through, success can be very sweet.

© Copyright 2013 Karen Utgoff. All rights reserved.